Not Checking Your Credit Score
Not reviewing around the credit score ahead of time is one of the biggest mistakes you can make. Lenders use your score to screen for eligibility and interest. A low or misleading credit score could result in higher rates, and possibly a denial. Check your credit early on and dispute any errors to increase your odds.
Ignoring Your Debt-to-Income Ratio
Lenders analyze your debt-to-income (DTI) ratio to gauge if you can manage a new loan. Applying with heavy debt compared to your income can hurt your approval. It is suggested getting your monthly debts under control and paying down loans or credit cards before you apply.
Not Saving Enough for Down Payment and Closing Costs
First-time buyers frequently underestimate how much cash they’ll need to have on hand. In addition to the down payment, you need cash for closing costs, inspections and other expenses. Not having enough saved can slow down the loan process or restrict your home options.
Making Big Financial Changes Before Approval
If you open new credit accounts, spend a lot of money or change jobs shortly before applying for your loan, you may cause your approval to be delayed. Lenders prefer financial stability. Try to keep your finances similar while waiting for a loan.
Choosing the Wrong Loan Type
There are many types of home loans, including fixed-rate, adjustable-rate, FHA, and VA loans. The simplest way to find out whether your credit score meets the standards for a home loan is to contact several lenders and explain your situation. Pick the wrong one for your financial situation and you can end up paying more than you have to or taking on undue risk. Do your research, and think long-term before jumping in.
Skipping Pre-Approval
Pre-approval demonstrates commitment and gives you a price range. Failing to get pre-approved can make it more difficult to compete in a competitive market and can mean disappointment if you find a home only to realize you cannot afford it.
Focusing Only on Interest Rates
Interest rates do matter, but it can be a mistake to focus only on them. Fees, terms or other costs can pile on. Think about the total price of taking the loan, and not just the monthly payments, when making a smart choice.
Failing to Read the Fine Print
Loan contracts contain terms, conditions and clauses which may have a direct impact of your settlement payments. Failure to read or comprehend this information can result in unexpected charges and/or limitations. Always read the contract carefully and do ask questions if something is not clear.
Not Working With a Trusted Lender or Advisor
Picking a lender without reading reviews or learning about them can cause issues. A lender or mortgage advisor you trust, takes you through the process, explains terms and helps prevent mistakes. Do your research and choose professionals with experience and a good reputation.
